New houses, service charges

henrygregory

Hi there,
I am in the process of purchasing a shared ownership new build property.
It states in the information leaflet
"The service charges stated are estimated and are to be confirmed by developer. They are expected to apply for road maintenance, lighting and communal grounds maintenance."

I have confirmed with the housing association that the property will be Leasehold until I staircase to 100% whereby I will outright own the property and it will convert to freehold.

Am I to expect that I will still have to pay the service charge even when I own the freehold?

I thought that the council adopted roads/lighting etc after a set period. Is there any way of finding this out?

TrickyDicky101

The service charge will likely apply even after you have staircased to 100%. This is increasingly common as council budgets are restricted and hence adoption is not guaranteed (and may even be specifically excluded as part of planning consent being granted for the development).

elverson

You can check the planning application on your local council website to see whether the roads would be adopted - probably in the Decision Notice.

Usually that would be done via a Section 38 Agreement:

http://www.highwayengineer.co.uk/section_38_road_closures.htm

SuboJvR

We are in the process of purchasing a new build. It is a freehold, but there is a service charge. This isn't "ground rent" but a specific service charge for maintaining the communal grounds, and is approx £240/year.

The development has some green space, including a little lake, and there is a woodland trail surrounding it that I believe comes under this too.

elverson

Does that mean you sign a separate contract with the owner of the grounds to agree to pay that?

henrygregory

elverson wrote: »

You can check the planning application on your local council website to see whether the roads would be adopted - probably in the Decision Notice.

Usually that would be done via a Section 38 Agreement:

http://www.highwayengineer.co.uk/section_38_road_closures.htm

Thanks, I contacted the HA in question and they came back to me pretty quickly clarifying that whilst I am a Shared Ownership owner, I would pay the service charges to the HA, and if I outright owned my property, then I would have to pay fees to a management company like all of the other private residents on the development. The management company would be responsible for maintaining the area and collecting the charges.

The development is a mix of 150 properties, 5 to 2 bed houses ranging from £850k-£380k and one bed flats. Would be interesting to see how these charges are worked out as having a house, on a street with no grass to cut, not sure what else other than the road and the communal play area would need doing for £25 per month?!

TrickyDicky101 wrote: »

The service charge will likely apply even after you have staircased to 100%. This is increasingly common as council budgets are restricted and hence adoption is not guaranteed (and may even be specifically excluded as part of planning consent being granted for the development).

Was not aware council now did this. I have to admit, it is slightly off putting as if I were able to buy a private house and found out that it had a service charge to pay on top of my mortgage, I would probably look elsewhere if I am honest. It is like you are living in a flat block but you are not!

We currently rent and pay £30 a month service charge for our two bed house. The street has 18 houses, no grass, about 5 or so street lamps and that is it. I have never seen anyone do anything for the money, and we are expected to cut our own grass. Seems like a real money making scheme as far as houses are concerned...flats, a different matter.

Thebestmumalive

You need to be aware that once you sign the legal documents you will have to pay the service charges at the agreed rate whether or not you have any grass etc. Any reservations you have should be dealt with now - once you have bought the property you will be legally bound by what you have signed.
Also, remember that the service charges will almost certainly rise. You will be paying for the managing agents fees, insurance and accounting on top of any actual maintenance that is done. Any maintenance that is done will have to be done by companies who have insurance and will be more expensive than paying someone a few quid to mow your grass.

Pete7

So in 20 years time when the road needs new tarmac who is paying for this? is there a reserve fund being set up to manage big ticket items?

Pete

henrygregory

Thebestmumalive wrote: »

You need to be aware that once you sign the legal documents you will have to pay the service charges at the agreed rate whether or not you have any grass etc. Any reservations you have should be dealt with now - once you have bought the property you will be legally bound by what you have signed.
Also, remember that the service charges will almost certainly rise. You will be paying for the managing agents fees, insurance and accounting on top of any actual maintenance that is done. Any maintenance that is done will have to be done by companies who have insurance and will be more expensive than paying someone a few quid to mow your grass.

Pete7 wrote: »

So in 20 years time when the road needs new tarmac who is paying for this? is there a reserve fund being set up to manage big ticket items?

Pete

Thank you both. It is quite tricky to get full answers as the Housing Association don't know all that much themselves. I often get the response, we have over 100 other people interested in this property, are you happy to proceed? Though I have to say, this has been the most helpful and informative HA I have dealt with to date. All others, I turned down and did not complete on a property.

I will ask the question and see what answer I get, but I am assuming, as this is Shared Ownership, the service charge and its conditions will be non-negotiable. I get the earlier comment about this being a more common thing because of council cuts etc, but in that case, not quite sure what Council Tax is for? We need more homes for people to live in, this in turn generates more Council Tax, so not sure why council can't adopt roads.

I am really looking at outright ownership on a property as soon as possible. I really do not want to be paying rent to a housing association, but sadly at the moment, I cannot afford a market rate private property. I am somewhat worried that this service charge would be a barrier to selling in the future as it would put off potential buyers, though I guess if all houses on the development are in the same scenario, it would not just be me.

kirtondm

I was put off by open ended service charges but pretty much all the new house around here have it

They write it into the title so their is no way of wrigling out of it.

You can't sell the house unless you are all paid up

didn't like the lack of control and no cap at all on what you could be expected to pay may be £250 this year but nothing preventing it being a few thousand in a few year time

Pete7

kirtondm wrote: »

didn't like the lack of control and no cap at all on what you could be expected to pay may be £250 this year but nothing preventing it being a few thousand in a few year time

Indeed, 2 years ago we bailed out of a freehold house with service charges when they exceeded £2400 pa. They have gone up again since. I was a director on the board so saw the figures and realised there was no hope, so sold up. So did 4 other directors in the same year.

Pete